GoPro Planning To Re-Release Karma Drone Before Holiday Season

GoPro Inc GPRO announced the recall of 2,500 Karma drones due to reports of power failures for less than 10 of the devices sold earlier.

JPMorgan’s Paul Coster maintained a Buy rating on the company.

Following a meeting with CFO Brian McGee, Coster mentioned that the company remains committed to the product category and “wants to ensure product safety, and quality,” and intends to re-release the Karma drone in time for the holiday season.

The recall is based on the new Karma drone’s tendency to lose power while in flight.

Although the cause of the power failures has not yet been identified, management intends to fix the issue and ramp production and distribution quickly.

Impact Of Recall

“Management mentioned on the 3Q call that Karma would account for less than 10 percent of 4Q sales, but the impact could be material, putting the low-end of the revenue and PF EPS range at risk, in our view,” the analyst stated.

Coster expects GoPro’s aggregate Q4 gross margins to be better than expected, given that Karma is a relatively low margin product.

The cost of the recall might not be significant, given that only 2,500 units were shipped, although there could be some one-time charges.

GoPro recently reported its Q3 results well below expectations, with short supply of the HERO5 product.